(Editor’s Note: Today’s post is sponsored by Gift Card Mall, offering a broad range of gift cards that can be delivered via email or traditional mail. Their site, BuyBulkGiftCards.com, has over 150 different gift cards from leading brands in clothing, restaurants, travel and entertainment. I’m excited to welcome them to HR Bartender. Enjoy the post!)
A couple weeks ago, I shared with you some research about what employees want. You can check out the post here. Bottom line, they want money. The post sparked an interesting conversation about recognition. I consider pay and recognition to be two different things. However, they are related and equally important.
Companies that are not in a position to increase wages for all of their employees have to find ways to offer benefits and recognition that can help to fill a void and grow engagement. Some things to consider are telework, relaxed dress codes, and practical forms of recognition. It doesn’t replace compensation but it can be more sensitive to the situation. From my experience, gift cards are a great recognition option to consider.
3 Types of People You Want to Recognize
The real benefit that gift cards offer is flexibility. Over the years, I’ve used gift cards as thanks in so many ways:
Employees – In the companies I’ve worked for, we always had a formal customer service program. To reinforce the principles learned during customer service training, we had a “caught you doing something right” program. Managers were given gift cards to recognize employees on the spot when they saw them delivering exceptional service to guests. Gift cards were small, so managers could carry a supply with them around the workplace. And managers told me they loved the spontaneity of the program. Obviously, employees enjoyed the surprise and the recognition – not just from their manager, but any manager.
Volunteers – When I was involved with HR conference planning, we always kept a supply of gift cards handy. It never failed that someone would step in to help us at the last minute. This allowed us to thank the person who might have missed a session or pulled some strings on our behalf. At last year’s SHRM conference, they were doing the same thing – giving out gift cards to people who had done a last minute good deed during the event.
Customers – This happens several ways. First, a company might give a gift card thanks to people who sign up for a product demonstration appointment. Second, companies can send a gift card to customers who complete a survey as a thanks for their time. Lastly, businesses could create social media contests where the winners receive gift cards. For any of these options, the gift cards could be easily mailed or handed out.
The common thread here is that gift cards can be used by many departments in your company. One department can be responsible for purchasing gift cards for the entire organization – helping the business get some benefit for purchasing in bulk. Gift Card Mall offer a rewards program that gives companies their own rewards such as airline tickets, dining coupons, etc. From my experience, we used the rewards as additional recognition – so you get a double bonus!
The Benefits of Gift Cards
I’ve been a fan of using gift cards for a very long time. Years ago, I realized the importance of giving employees authentic and personalized gifts. I worked for a company that spent a tremendous amount of money creating a recognition program. The CEO wanted all of the recognition items to reflect the pride he had in his employees and the first-class customer service they gave to our customers. So he had all their gifts custom made at Tiffany & Co. Yep, the little blue box company.
Shortly after the program was launched, I discovered that the employees were pawning their gifts. I was speechless, and then I figured out why. The employees didn’t have any use for tchotchkes from Tiffany. They wanted needed money! We weren’t the type of company to hand out cash on the spot, so gift cards became a great option. Here are a few things I really loved — and still love — about gift cards:
- Gift cards are easy to store, carry, and distribute. People can put them in their pocket or send them through the mail.
- Gift cards provide a variety of gifting options. Some people want iTunes, but not everyone owns Apple products. Others love Starbucks. Recipients can select the card that means the most to them.
- Bulk purchasing gift cards saves time and money. Again, marketing and human resources can get together and buy gift cards for everyone. We stored ours in a secure location, and always had some on hand so we could give our thanks and recognition at any time.
- Gift cards can be customized with a company logo or other visuals. Another cool feature is to have the company logo printed on a VISA card. It allows the ultimate in flexibility – you’re not just giving a gift card to a place, it’s money. And it keeps the company logo in front of the recipient.
- Lastly, gift cards are safe. They can be replaced if they’re lost or stolen. I never wanted to be in a position of telling an employee I can’t replace their recognition gift if something unfortunate happened.
Honestly, I’ve never found a person who hated gift cards. While there are some people who consider them to be impersonal, I’d argue they are actually more personal. Gift card recipients can get what they want when they want it. What’s more personal than that?
[Tweet “You Can Easily #GiveBetter Employee Recognition”]
If you want to learn more about Gift Card Mall and the options they provide, check out their website here.
Paul Hebert says
Nice advertisement for gift cards…. but my real beef here is in the headline itself…
Rewards and recognition are not compensation and to draw a comparison that suggests – if you can’t give them money give them a gift card is like saying if you can’t give them food give them a bicycle.
Two unrelated and different things – compensation and rewards/recognition are not mutually exclusive – they are complementary – not substitutes. One of the main reasons we still have problems with engagement in our companies today is the fundamental misunderstanding of that simple fact.
If you need to give raises – give raises not gift cards. That’s just bad management and a total misunderstanding of what impact human behavior and engagement.
Sharlyn Lauby says
Hi Paul. Thanks for sharing your thoughts. We agree that rewards and recognition are not compensation. That doesn’t mean that rewards and recognition cannot be money.
In my experience, there are many companies who struggle with recognizing employees. Especially when they know that employees would like a pay increase (and the company just can’t make that happen). It’s very rarely as simple as “if they want more money, pay them more”. Companies need creative options.
Paul Hebert says
My point was that if you need to pay more – recognition and rewards are not the answer. You’d be better off not doing the “gift card” and having a better conversation about the issue of pay with employee.
I would disagree that recognition is money. Recognition is a verb not a noun. Recognition can occur without money. The confusion we seem to have in business is that when someone wants recognition/validation we want to throw money at them. That confuses the issue and converts what was emotional validation into transactional – which now becomes a discussion of “how much is it worth” which never ends well.
The idea that you can mitigate a pay issue with gift cards is just plain wrong. You can spin it as “recognition” but the post is saying – if you can’t pay them – give them a latte or a visa card. That just isn’t true and it is bad management advice IMO.
This post is a pure play advertisement for gift cards which – while always a top request by employees (so is cash by the way) are not the best way to recognize.
Rhonda Fox says
Hmmmm . . . I notice that there was no mention at all that these gift cards under IRS rules are considered wages and would need to be reported as taxable income. I think it is important to point that out rather than leaving it out.
Sharlyn Lauby says
Thanks for the comment Rhonda. I think it goes without saying that companies should follow the law with all of the policies and programs.
Steve Risner says
HR Associates has been giving gift cards to employees for years. Moral always improves as soon as we reward the staff for a job well done. We never add the amounts to W2’s, so from the employee point of view, the card is tax free.
Many companies, including ours, are unable to increase wages more than once a year… as in an annual 3% raise we give to our internal staff.
Ohio businesses received a BWC refund last year and our office families were treated to a day at the Kings Island Amusement Park in Cincinnati. We try to encourage with appreciation.
Paul Hebert says
Steve – you may want to go get with your CFO and tax adviser – you are not in compliance with the IRS…
Specifically from the IRS:
“So, if an employer provides a turkey, a ham, or other property of nominal value to employees, the value of these items is not considered wages or salary and is excludable from income. But if an employer provides gift cards, certificates, or coupons to purchase a turkey, ham, or other nominal value property, these are considered wages and are subject to income and employment taxes (even when the card restricts the items purchased, the time to use the coupon, and any unused portion is forfeited) because cash equivalents do not meet the de minimis fringe benefit requirements. ”
Read more here: http://www.irs.gov/pub/irs-tege/p_4090_fed_0305_text.pdf
Let’s just hope the IRS doesn’t read this blog and that you don’t have too many years of gift cards to pay taxes on – or your employees either – that would be a nice surprise no?
Rhonda Fox says
Don’t shoot the messenger . . . Directly from the IRS . . .
http://www.irs.gov/Government-Entities/Federal,-State-&-Local-Governments/De-Minimis-Fringe-Benefits
Gift certificates
Cash or cash equivalent items “provided by the employer are never excludable from income.” An exception applies for occasional meal money or transportation fare to allow an employee to work beyond normal hours. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable.
Sharlyn Lauby says
While I do think the comments have ventured off the original idea of “giving someone a Starbucks gift card can be a nice thing to do”, I wanted to share an article related that speaks to the complexities of gift cards being taxable wages.
I’m definitely not an attorney or a tax consultant so I believe that companies that have questions should seek professional advice on this issue. That being said, here’s a recent article, written by an attorney, directly from the SHRM website:
http://www.shrm.org/hrdisciplines/compensation/articles/pages/holiday-gifts-taxable.aspx
Terry Lee says
I agree with Paul, and add that sponsoring an article about the value of gift cards as recognition by Gift Card Mall is perhaps poor planning, and more likely shameless gift card advertising.
There’s lots of research about how employees will say they want cash (and gift cards), but the lasting impact on employee performance based on being recognized with those forms of rewards is nil. Cash and gift cards are spent on transactional, household items and quickly forgotten. Easy? Sure. Effective and lasting? Not so much.
Good conversation – thanks Sharlyn.
Steve Risner says
Paul- Let me clarify for you… we do not add the taxes to the weekly check the employee gets… we have a “Bonus/Gift” folder in our Back-Office software where we keep track of an employee’s awards throughout the year. We use a process called “Grossing Up” to cover employment taxes on gift cards.
Have you ever been on the giving end?